Mobile network operators long have understood the potential effect inclement weather has on their networks and typically maintain business continuity, loss prevention and disaster recovery plans well in advance of a damaging storm or catastrophe. However, a few storms of more controllable origins are developing before our eyes that many operators remain unprepared to endure. It appears highly probable that these brewing storms are set to converge, thus increasing the effects felt across the wireless infrastructure world.
The United States and Europe have roughly 800,000 cellular antenna sites, and underneath every single one is a piece of real property that must be acquired, developed, managed, maintained, upgraded and renewed throughout the life of each cell site.
The future of 5G wireless communications networks depends on these cell sites, and without a proactive strategy in place to manage the converging storms of rising volumes, costs and complexities within underlying real property portfolios, the rollout of 5G wireless communications could be derailed.
The advent of 5G services will significantly increase the number of sites required to provide mobile broadband, the total rental expense required to maintain the real property portfolio and the volume and complexity of corresponding documents and data that will need to be maintained for each site.
The wireless communications industry trade association CTIA cites S&P Global Market Intelligence as estimating that more than 800,000 small cells will be deployed in the United States by 2026. Although this number may be affected temporarily as budgets shift from deploying millimeter-wave small cells to capitalize on the $81 billion recently invested into 3.7 GHz and mid-band spectrum, the number of U.S. cell sites could triple over the next five years.
European operators also expect to take advantage of mid-band frequencies to deploy 5G service. However, it is safe to say that between 500,000 and 800,000 small cells will be required in Europe over the next five years as well, thereby more than doubling the combined number of sites on the continent and contributing to the exponential increase in demand of small cells globally.
Just because we call them “small” cells does not mean they are easier to manage or require less long-term management with the owner of the right of way. As with traditional macro sites, each small cell must be acquired, deployed and managed to increase further the load on their bottom lines.
Traditionally, operators have managed these vast, real property portfolios in-house to maintain control and confidentiality despite property management lying outside their core mobile communications expertise. Given the number of new 5G sites and the speed at which they will be deployed, the industry is primed to face nothing ever experienced before with 2G, 3G or 4G technology.
With knowledge of this small cell expansion data set, operators need to rethink their strategies for real property and asset management in order to optimize the efficiency of their rollouts. Amid a rapid transformation such as what we are experiencing with 5G wireless, it is critical to keep operators’ attention focused on their areas of expertise and to delegate appropriately to those who can handle the less-technical, yet wildly complex, roadblocks.
The rent spend for cell sites is one of the largest operating expenses for operators, along with payroll and backhaul. Recent lease accounting changes also add lease liability to the balance sheet and modify how leases are expensed. These magnify bottom-line effects and associated risks.
Companies’ annual earnings reports typically combine cell site rents with rents for retail locations, offices and other operating facilities, which make it difficult to discern their rent spends on cell sites. However, using conservative assumptions about the number of cell sites, forecasted site upgrades, typical rents for each, and newly constructed sites, reveals an estimated industrywide rent spend in the United States of $9.3 billion in 2020, and a forecasted spend of $19.6 billion by 2035.
A mobile network operator’s real estate portfolio can be extensive. However, its current size will be dwarfed by what the future brings. The assumption across many of these sites is an annual leasing cost increase of 3 to 4 percent, but that does not paint the complete picture. Unlike networking equipment, where operators see a reduction in per-unit cost based on volume, site-leasing costs continually increase, and site upgrades remove an additional 2 to 3 percent per year from the bottom line.
These costs are proving to have a powerful effect on the current speed of network deployments — and they only account for the current sites under management. As more sites come online to enable 5G service, they will incur additional costs. Every site will require modification, and carriers will need to add significantly more infrastructure and equipment to their portfolio. This means a greater chance for more — and potentially avoidable — costs.
When it comes to managing leases, not much has changed over the years, despite technical advances elsewhere. This is somewhat ironic, because wireless networks help to increase innovation worldwide, yet the underlying lease management systems have not followed suit.
In addition to the added complexity of managing an operation in this fashion, the paperwork itself is at times lacking in quality. Real estate is a network of many properties for mobile network operators, evolving from multiple acquisitions, integrations and divestments.
This evolution has led to a tangled web of paperwork with unscanned, unreadable and incomplete files stored in multiple locations. Adding to this problem, many different groups and organizations are involved in every deal, leaving tools, processes and priorities to provoke more conflict, further exacerbating the problem.
This matter of document management historically has led to incomplete and inaccurate data, as well as inefficient processes. As the size of portfolios increases, newer and better ways of working must be explored to streamline the process and build a truly world connected.
Between the surge of small cell sites, the escalating costs of leased real estate and problems with lease documentation, carriers face an uphill battle with their real estate expenses.
Solving these problems is possible with the right approach at data and document management. The accuracy of data and its ease of accessibility can make all the difference for efficient rollouts. Organizations need to optimize their real property portfolios and use data-driven lease management, and simply continuing to do the same thing is not an option for enabling the world to reach its technological peak.
Michael Fraunces, J.D., is president, North America, at MD7, where he leads MD7’s consulting practice and is responsible for keeping the company at the forefront of the industry through product and service innovations. Fraunces previously led MD7’s U.S. business operations. He joined MD7 in 2003.
MD7, a wireless infrastructure consultancy with its North American headquarters in Allen, Texas, and international headquarters in Dublin, said that it has been re-certified as climate-neutral company by Climate Partner. It said it has reduced the CO2 footprint of its European offices in 2020 compared with 2019, despite an increase in the number of employees. MD7’s headquarters in Dublin will be its third office to be fully run by green power, the company said. It said that the total emissions that were offset by MD7 in 2020 are equivalent to almost 300 tons of CO2.
“Reducing our carbon emissions across all of our offices despite growing really fast is a massive achievement,” said Mark Christenson, MD7 president of international. “It also makes me happy to see our office in Düsseldorf move to green energy, making it the second, after Maastricht, to be run by green electricity.”
Reducing MD7’s carbon footprint by almost 60 percent year-on-year saved an enormous amount of CO2 emissions, said Aaron Rodrigo, MD7 program manager.
“Many of these saved emissions relate to a significantly lower number of flights – which to some degree is of course related to the very limited business traveling activities during the pandemic,” Rodrigo said. “However, even as business travel has started to take off the ground again in 2021, we still keep our emissions from flights at a minimum.”
MD7 said it is seeking to further increase its carbon offsetting over the coming years, and recently switched its power provider for their headquarters in Dublin to make it their third office in Europe to be fully run by green electricity. MD7 also said it plans to reduce its CO2 emissions per full-time employee by 10 percent year-on-year until 2025 compared to 2019. Strategically, the company said, MD7’s goal is to not only make all of its current and future offices fully green, but also to become carbon positive by offsetting more CO2 than it produces by 2022.
MD7, a wireless infrastructure consultancy, disclosed that it has achieved ISO 27001:2013 certification, the international standard for managing data and cyber security. The company said that this achievement certifies the process MD7 uses to manage the security of assets such as financial information, intellectual property, employee details and information entrusted by third parties.
“Some organizations will not hire a company that doesn’t have ISO certification,” Scott Belie, MD7 chief technology officer, said. “The 27001:2013 certification is for data security, whereas the 9001:2015 certification we completed a few years ago focuses on overall quality and internal processes and controls.”
Thomas Leddo, MD7 chief strategy officer, said that obtaining a certification means that MD7 adheres to the international standard for establishing, implementing, maintaining and continually improving an information security management system (ISMS), helping to ensure an organization’s information assets are secure.
The company said that some of MD7’s customers, such as AT&T in the United States and Vodafone in Europe, prompted the company to become ISO 9001:2015 certified a few years ago because it adopted policies that encouraged all vendors and partners to be certified.
“While achieving ISO 27001:2013, we discovered some other proposal requests that we’ve been involved with were asking particular questions about the security of data and cybersecurity in general,” Leddo said.
More and more companies require vendors and partners to adhere to recognized standards to ensure that the vendors meet third-party standard requirements, according to Leddo. It removes some of the work necessary to vet a vendor while providing a high degree of assurance that the company is meeting expected standards, he said.
“At MD7 continuous improvement is one of our core values,” Belie said. “Completing this certification is just one of the ways we are improving our security footprint. With this certification, we are giving our customers better visibility into our security posture by comparing our efforts to a well-known industry benchmark.”
A mobile infrastructure consulting business, MD7, has plans to move its headquarters from San Diego to Allen, Texas. Elected officials, the head of a city development agency and a company executive expressed themselves about the relocation in a statement issued by the state governor’s office. The relocation will create 218 new jobs and more than $6.8 million in capital investment, according to the statement. It said that a Texas Enterprise Fund (TEF) grant of $773,000 has been extended to MD7, which includes a $10,000 Veteran Created Job Bonus.
“I am proud to welcome MD7’s headquarters to North Texas and excited for the job opportunities created through this project for veterans and other hardworking Texans,” said Gov. Greg Abbott. “The relocation of their headquarters will have a positive impact not only on the City of Allen, but the entire state of Texas. MD7 will join an already thriving tech and telecommunications industry in the Lone Star State, and I look forward to the opportunity and prosperity that is to come through their relocation to Texas.”
State Sen. Angela Paxton said that she was excited to welcome MD7 to Allen to join a number of corporate headquarters that call North Texas their home, many of them within Senate District 8 and Collin County. “The Texas economy continues to be a magnet for companies and employees seeking new expansion opportunities,” she said.
State Rep. Jeff Leach said that the decision of MD7 to plant roots in Allen was wonderful news not only for MD7 and its talented employees, but also for Allen citizens and for Texas. “I can think of no better place in America to make a living and raise a family than here in our backyard — and MD7’s decision to invest here is evidence of that,” he said. “I am proud of the active, collaborative partnership between our community and our state leaders to make this happen and look forward to our continued strategic and dynamic growth in the days to come.”
Michael Gianni, CEO of MD7, expressed excitement on behalf of the company to join the community of what he called future-focused technology services companies in Texas, as MD7 opens the new location and continues to expand globally. “We believe the friendly business climate and exceptional work environment for our team members will be a competitive advantage as we continue to grow to serve our customers,” he said. “We are grateful for the tremendous support and incredibly welcoming approach we have received from the state and the Allen community.”
Allen Mayor Ken Fulk said that the city of Allen was thrilled to welcome MD7, noting that the company would brings hundreds of well-paying jobs to the city’s Watters Creek District. “With a strong state and local incentive package, MD7 will join a growing list of corporate citizens that bolster Allen’s diverse tax base and align with our city’s strategic plan,” he said.
Dan Bowman, executive director of Allen Economic Development, said that MD7 evaluated numerous cities around the country. “Workforce, top-tier schools and the amenity-rich One Bethany at Watters Creek made Allen a natural fit for this innovative company,” he said.
Small cells and DAS are becoming the platform for in-building connectivity. The challenge is in deciding what goes best where — and establishing who will pony up to cover the costs.
Small Cell Magazine, First Quarter, 2016 — Traditionally, wireless operators have built cellular networks to cover the majority of the areas in which their subscribers live, work and visit. And, these same subscribers have frequently switched to private Wi-Fi networks at home, coffee shops and other places to lower their data charges or usurp a congested network. With the occasional exception of a third-party Distributed Antenna System (DAS) system in a stadium, arena or other large venue (such as a shopping mall), there have been few in-building “cellular” systems. And usually, DAS systems are installed and managed by either an operator, a venue owner, or a third party charging operators access.
Recently, however, the exponential increase in demand for wireless data is causing the traditional model to evolve. Cellular operators are racing to deploy DAS systems in large venues as quickly as possible. But these systems are expensive — often costing in excess of $1 million. While this capital outlay makes sense for a Super Bowl stadium, campus environments or other high-profile facilities, the economics simply don’t make sense when scaled across multiple facilities (particularly office buildings and multi-family residential). And, while the still-developing metro-cell and small-cell technology will economize many more deployments, it is still not yet serving as a single solution for all facilities experiencing capacity issues. The economics of a small cell system are not yet fully developed, but it is becoming apparent that it will work in some, but not all, buildings. Even if it did, operators simply cannot build out every sports arena, concert venue, hospital, hotel, tourist area, office building and apartment complex in time to keep pace with demand.
Four General Categories for In-Building Coverage
Generally, the facilities that need in-building coverage fall into four categories.
1. Large Venues Such as Stadiums, Arenas and Campus Environments
As mentioned above, there are certain venues that wireless operators are just going to build out, such as a football stadium hosting the Super Bowl. While it is inaccurate to say that cost does not matter in a venue of this type, carriers are going to spend what is needed to make sure they have the capacity required to make for a seamless event. There is no way a major operator that sponsors events at stadiums and arenas is going to let tens of thousands of customers have a negative experience due to lack of capacity — especially in an arena for which they also own the naming rights.
These venues are covered with a neutral host DAS. One carrier or a third party will build out the DAS, with other carriers joining to share the network as part of a cost sharing or other financial arrangement.
These types of DAS networks are common in facilities ranging from large stadiums and arenas to large office buildings and shopping malls.
Who pays: Typically, the cellular operators pay either directly or through recurring payments to the owner of the DAS system. However, some venues have their own self-funded Wi-Fi installed as well.
2. Large and Medium-to-Large Buildings
One step below the large venue, for which providing enough capacity is a business necessity, are large hotels and office buildings. In this scenario, operators would like to offer in-building coverage but simply may not have the time and/or budget to get to all of them. In most cases, they will get to them when and if they can.
The challenge with buildings of this nature is that there are so many of them. The owners and operators of these buildings realize they have capacity issues that may be affecting their customers and tenants, but operators facing capacity issues do not need to build them all at this time. If an operator is having capacity issues in a particular area of town, the operator can build out a handful of in-building systems in the area — thereby reducing capacity on the macro network. The remaining buildings will need to either survive off of the existing macro coverage and/or install their own private Wi-Fi system.
Some of these buildings may in fact be large enough to justify a DAS installation. Others may be good candidates for the rapidly evolving small cell systems that can be installed for less money. But if the building owners know they need to improve connectivity and have no visibility into an operator’s build plan, they may opt to take measures into their own hands by developing a more robust, private Wi-Fi network. In essence, they must decide whether to wait for the operators to come or to build it themselves. And in a world where connectivity is now the fourth utility, they are finding it harder to wait.
Who pays: The operators pay in some cases; the building owners pay in others.
3. Medium and Small Buildings
This category includes medium to small office buildings, apartment complexes, retail establishments and restaurants, among other buildings, which are starting to see the need for connectivity beyond that provided by the traditional macro network.
The Md7 office where I work, for example, sits on the third floor of a three-story, 75,000-square-foot building that overlooks the I-5/I-805 “merge” with 10 lanes of traffic in San Diego. The office is also next door to an apartment/condo complex with several hundred recently constructed units. Md7 has seen a significant drop in bandwidth in the last year, but the building is simply not large enough to justify an operator installing a DAS — and it is probably several years away from an in-building small cell. Hopefully, adjustments will be made to the macro sites nearby — particularly as the new apartments begin to lease up. In the meantime, Md7 will have to closely manage our Wi-Fi.
A second example is a new, fairly large, trendy restaurant in a historic building with no 3G or LTE coverage available. While I was there on a date with my wife recently, the server gladly offered us the restaurant’s Wi-Fi password so that we could post and tweet photos of our food and tell the world how much fun we were having in their restaurant. Social media is key to driving their business, and the new reality is that people will leave an establishment in which they can’t use their smartphones.
In both of these examples, the renting tenant is paying for Wi-Fi, but many building owners are starting to acknowledge connectivity as a utility and are funding it themselves to keep their tenants satisfied.
Who pays: The building owners and/or their tenants.
In 2009, I bought a new Femtocell device from my cellular service provider. My family was having problems connecting to the network and calls were dropping more frequently, so I swallowed my pride and paid $250 to solve my carrier’s coverage problem. I expected to get maximum “bars” in my house easily and seamlessly. But my experience was far from plug-and-play. In fact, when I called the carrier’s help desk, they said something to the effect of: “Oh, it doesn’t work with data plans yet. You’ll need to turn off the data portion of your Blackberry each time you walk in the house.” I promptly packaged it up and returned it to the retail store.
Since that time, two things have changed: I no longer use a Blackberry, and my high hopes for a private Femtocell in my home have dissipated. But Apple has solved both of those problems for me. I replaced the Blackberry with an iPhone and my Femto with an Airport Extreme. I even solved my extended coverage problem by buying an Airport Express to stretch the Wi-Fi to the back of the house and backyard. I rarely make traditional phone calls at home; I generally text, post and use FaceTime — all of which are free and easy using Wi-Fi and my Apple devices.
Who pays: The resident, of course.
Wireless operators are obviously enhancing capacity with the largest venues first and then working their way down from there. But it is simply not realistic to expect them to completely underlay their entire macro network with a variety of microsites, aka the HetNet.
Even if they could reach every building, the capital expenditure required would be enormous — and the operators already have to learn to operate in a new environment of 100 percent penetration and intense price competition.
Smartphone users’ insatiable demand for bandwidth will not cease.
Building owners need to consider the reality of the new “fourth-utility” connectivity. Whether for residential or commercial use, the tenants and customers within these buildings will continue to demand connectivity — and they will also begin to factor connectivity into their decisions about where they choose to live, work, shop, eat and play.
Connectivity is now an expectation. We need to develop connectivity everywhere. If we don’t, consumers will begin avoiding unconnected areas. If you do not build it, they will not come.
Tom Leddo serves as Vice President at Md7, a turnkey cell site development and wireless real estate services company. Tom has been with Md7 since 2004 and has served in the wireless infrastructure industry since 1995. He holds a B.S. In Corporate Finance and Investment Management, as well as a M.B.A. From The University of Alabama. He can be reached at [email protected] and is also active on LinkedIn